USD US Dollar Index Weekly Chart Sideways Channel

The US dollar index was spanked down by the negative divergence red lines beginning at Thanksgiving. In November and December, the consensus of traders proclaimed that the dollar was going to the moon and nothing would stop its catapult higher. Of course the opposite happened but if you were reading the charts and studying the neggie d you knew the consensus was wrong at the end of last year.

The USD moves through a sideways channel for over one year. The current 94-ish is strong support. 93 is also strong support. There are lots of gaps below left behind during the dollar's parabolic run in late 2014 (tiny circles). Those will need filled at some point in the future. The tight standard deviation bands squeezed out the parabolic move higher in summer 2014 (pink arrows). Tight bands sent the dollar higher last summer. In February this year, the tight bands send the dollar lower and price is now violating the lower band so a recovery to the middle band at 97.49 and falling is in play.

The stochastics are oversold so that will help create a very near term bounce, but note the other indicators that remain weak and bleak wanting to see lower prices for the dollar after any recovery moves occur. Note the trend lower since the top in November how price is printing lower lows and lower highs in the downward-sloping blue channel.

The expectation would be for price to play around at 93.0-94.50, say this month into May, and then recover to 96-98, say, in May-July, then perhaps rolling over with weakness again. ECB President Draghi keeps offering stimulus to lower the euro which sends the dollar basket higher. The USD monthly chart printed a major top at the end of last year and the expectation would be for the dollar to move sideways to sideways lower all year long on a monthly basis. This is interesting considering that Draghi is going to be firing his biggest money bazooka's.

The US dollar index daily chart is set to launch higher due to positive divergence, a falling wedge and oversold conditions. Thus, the weekly chart may base quicker than thought. Considering the daily chart, a long position can be placed on the dollar right now. Keystone does not hold any trades on currency right now but a long play such as UUP or short against the FXE may be considered for this week. The long dollar trade is more attractive than short euro. The USD will likely bounce and rally over the next couple weeks but then likely roll back over to the downside again to honor the weakness on the weekly chart indicators. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.